Russian energy companies have tried to launch new liquefied natural gas (LNG) production lines in the face of Western sanctions, which has sparked dissatisfaction in the United States.
U.S. Assistant Secretary of State Pyat has already made harsh remarks, saying that the U.S. government's goal is to ensure that Russia cannot develop any new LNG projects. The Russian side resolutely sent people south to try to find a breakthrough in solving the problem from China. This time, Putin should be grateful to the United States, which once again fulfilled the cooperation between China and Russia, so that China and Russia won again.
[U.S. Assistant Secretary of State Pyat has just released cruel words to the outside world]
According to Russian media reports, the U.S. government is now eyeing the "Arctic LNG 2" project jointly invested by Russian energy giant Novatek, PetroChina, CNOOC, France's TotalEnergies and Japan's Arctic LNG 2.
According to the original plan, the companies will jointly invest in the construction of three new LNG production lines on Russia's Jidan Peninsula to develop local natural gas resources, each with an annual production capacity of about 6.6 million tons. Whether this project can be put into operation smoothly will also determine whether Russia can achieve its long-term development goal of producing more than 100 million tons of LNG per year as scheduled.
Originally, the original production line should have officially started producing LNG in December last year, and the relevant LNG should have been shipped from ports in the Arctic Circle in January this year. However, in November last year, the United States added Novatek's related subsidiaries responsible for the operation of specific projects to the sanctions list, which caused a series of negative impacts on the operation of the projects.
First and foremost is the retreat of some international partners. It is now widely speculated that TotalEnergies should officially withdraw from the project in the near future. If the U.S. puts further pressure, Japanese companies may also opt out.
[The "Arctic LNG No. 2" project was originally put into production]
Then, under the influence of sanctions, Novatek, as a major shareholder, is now unable to find enough carriers from the international shipping market that are adapted to sail in the cold conditions of the Arctic Ocean to transport the LNG that has already been produced. It is reported that due to the shortage of transport ships, the Russian side has actually suspended the operation of the project.
Finally, in order to meet the LNG transportation needs after the completion of this project, Russia's Hyundai Merchant Marine and Japan's Mitsui Merchant Marine Co., Ltd. have ordered a total of 21 professional vessels specially used for LNG transportation in extreme cold conditions from Russia's Red Star Shipyard and South Korea's Hanwha Marine Group. Six of the ships were built by Hanwha Group, and 15 were built by Red Star Shipyard with technical support from Samsung Heavy Industries.
However, under the pressure of Western sanctions, Hanwha Marine has terminated its contract with Hyundai Merchant Marine, and the construction of three related transport ships has been suspended, leaving only three ships handed over to the Japanese side to still be built.
Three of the ships built by the Red Star Shipyard should be officially completed and two are under construction, but Samsung has stopped cooperating with the Russian side to build the next 10 LNG carriers, but the contract has not yet been officially canceled. If these issues are not resolved, there is a real risk that the project will be halted entirely.
[Some LNG vessels produced by Russian shipyards have been delivered]
It should be noted that the United States is now focusing on the "Arctic LNG No. 2" project, which also has two purposes.
The primary purpose is naturally to use this to hit Russia's energy exports and achieve the strategic goal of causing Russia to continue to bleed. As long as Russia's energy cannot be exported smoothly, the Putin government will not be able to obtain a large amount of fiscal revenue through the collection of corporate income tax and other taxes to maintain the war in Ukraine and solve the domestic economic and people's livelihood problems.
Moreover, under the influence of factors such as the decline in overall exports and the increase in exploitation taxes by the Putin government, the core business revenue of Russian energy companies has shrunk sharply, and if this situation continues, the development of Russian energy companies will also be difficult. Eventually, these challenges could lead to changes in Russia.
[Putin should thank the United States for the sanctions that are completing another strategic alliance between China and Russia]
The second purpose is to ensure that Russia will not be able to regain market share in Europe through this project, strengthen the United States' own position in the international LNG market, and ensure the export earnings of its own companies.
Public data shows that before the start of the Russia-Ukraine war, 45% of Europe's annual natural gas imports came from Russia, and the United States' liquefied natural gas accounted for only 14% of the European market.
However, with a series of events such as the bombing of the "Nord Stream" pipeline, Gazprom has basically withdrawn from the European market, and the United States' liquefied natural gas accounts for more than 50% of the European market. American companies have made a lot of money, and the Biden administration has naturally reaped certain economic and political benefits.
[The United States made a big profit by exporting LNG to Europe]
This would explain why Pyat mentioned this time that Russia would not be able to send gas to Europe as it had done before.
However, the U.S. is now actively adding obstacles to Russia, which in turn will push China and Russia to further deepen energy cooperation. After all, China and Russia already cooperate on this LNG project, and Chinese companies are actually victims of US sanctions. It is entirely possible that China and Russia will deepen their cooperation and jointly respond to sanctions.
In addition, China and Russia are negotiating on the "Power of Siberia 2" project, and the "Far East Pipeline" project has also been negotiated, but it will take time for these pipelines to be officially completed, and coupled with the continuous growth of domestic natural gas demand, China still needs to continue to purchase large quantities of LNG from the international market. China has a certain demand for LNG produced in Russia.
At the same time, the geographical location of China and Russia determines that Russia can transport natural gas to China by rail or road. Chinese shipbuilders also have sufficient technical strength to help the Russian side complete the construction of relevant LNG carriers after South Korean companies retreat, and appropriately take over some new ship construction tasks.
Naturally, the Russians are also thinking of China, where Novatek has set up a new office and is forming a new marketing team to find more buyers from China to take over the LNG.
[The Russian side has sent people south to China to find new buyers]
It can be seen that the sanctions imposed by the United States have indeed affected the operation of the "Arctic LNG No. 2" project and brought some trouble to the Russian side, but the Russian side is far from the point of exhaustion. As long as Russia can negotiate new cooperation with China on the basis of mutual benefit, most of the LNG export problems it is facing can be easily solved.
The US side will inevitably be dissatisfied with this, but apart from making irresponsible remarks about Sino-Russian cooperation in international public opinion, Washington may not be able to come up with any effective means to truly hinder the deepening of Sino-Russian energy cooperation.